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For anyone looking to get started as a crypto trader, cryptocurrency exchange platforms offer one of the best venues for buying and selling cryptocurrency.

As the number of cryptocurrencies on offer continues to grow, most crypto exchanges have grown accustomed to offering users a variety of coins, tokens, or altcoins. These digital assets are also available for trading in other cryptocurrencies like Bitcoin and Ethereum.

However, with so many exchanges available, it can be daunting trying to figure out which ones best suit your needs.

How Centralized Crypto Exchanges Work

Once you have your money deposited on a CeX, the process of purchasing your cryptocurrencies is easy. The CeX often comes with a built in crypto wallet, which you can use for your cryptocurrencies. You can also withdraw your crypto assets to another wallet.

Each centralized exchange has a unique internal architecture. However, most exchanges have order books that match the buy and sell orders.

The order book of A CeX lists all orders (buy or sell) made by users who want to trade cryptocurrencies on the exchange. Prices range from the lowest, best bid, highest, and most expensive.

Once an order is matched by a counter-party (i.e., a buyer or seller), the order will be taken by the platform operators, who match the orders and provide liquidity, thus enabling an efficient and fast trade execution at the best price.

How decentralized crypto exchanges work

Although decentralized exchanges can be very easy to use, there are some learning curves. These types of exchanges allow you to buy cryptocurrencies from other users with nothing but the blockchain as the intermediary.

People who wish to exchange cryptocurrency without the need to use a third party or trust a central entity for safety and security are well-suited to DeXs.

There are two categories of decentralized changes: order-book-based decentralized exchanges and automated market-making DeXs.

Order-book-based decentralized exchanges operate in the same way as centralized exchanges in that they list all of their orders on an order book with prices ranging from best asking prices to the best bids. They use a decentralized framework for matching and settling transactions. Order books are not used by automated market-making DeXs. Smart contracts are used to match and settle orders between users’ wallets and smart contracts. AMM DeXs also outsource liquidity from platform users.

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